Rethink procurement for infra, consultancy

India’s public procurement system has long relied on the L1 principle—awarding contracts to the lowest bidder among technically qualified participants. This approach, grounded in the virtues of transparency and cost minimisation, has served well in standardised, low-value purchases. However, its continued application, especially to infrastructure projects and consultancy services, is increasingly proving to be counterproductive and even damaging.

Infrastructure is not a commodity; it is a long-term national asset. Roads, highways, power systems, and urban infrastructure define economic efficiency and citizen welfare for decades. Yet, when contracts are awarded primarily on the basis of lowest cost, bidders are incentivised to under-quote aggressively. This often leads to compromises in design, materials, and execution standards. The result is familiar: sub-standard execution, time overruns, cost escalations, frequent repairs, and in some cases, outright project failure.

The paradox is stark—what appears as fiscal prudence at the procurement stage translates into higher life-cycle costs. Poor-quality infrastructure demands repeated maintenance, disrupts economic activity, and burdens public finances over time. The L1 system, in effect, shifts focus from value creation to mere cost suppression. In fact, it may cost more in long run.

L1 Paradox

The problem is even more acute in the selection of consultants. Consultancy is an intellectual service where quality depends on expertise, innovation, domain knowledge, and supervision, which is crucial. When contracts are awarded to the lowest bidder, high-quality firms are either discouraged from participating or forced to dilute their offerings. This leads to suboptimal project design, weak feasibility assessments, and inadequate risk mitigation frameworks.

Over time, such practices erode the ecosystem of professional excellence. Firms have little incentive to invest in research, skill development, and the induction of professionals of proven competence or background in time-bound supervision.

Technological innovation may be compromised if procurement rewards only the lowest price. This has serious implications for India’s ambitions of building world-class infrastructure for Viksit Bharat by 2047 and becoming a global hub for engineering and design services.

Another limitation of the L1 system is its inability to adequately account for non-price parameters. Infrastructure and consultancy projects demand rigorous evaluation of technical capability, past performance, life-cycle costs, and long-term reliability. In today’s context, factors such as sustainability, resilience, and even security of supply chains are equally critical. A narrow technical qualification followed by price-based selection cannot capture many of these complexities.

The consequences are evident across sectors—stalled projects, contractual disputes, arbitration, and re-tendering. These delays not only inflate costs but also erode investor confidence. Private players, particularly those focused on quality and innovation, often shy away from participating in such a procurement environment.

India has begun to recognise these challenges. There have been moves towards adopting Quality-and-Cost-Based Selection (QCBS) and relaxing rigid L1 norms in certain sectors. However, these efforts remain fragmented and lack a unified policy framework.

From Checklist to Competence

What is needed is a fundamental shift from “lowest cost” to “best value” procurement. This requires a structured evaluation framework where price is only one component—alongside technical quality, life-cycle cost, and performance track record. For complex and strategic projects, the weight assigned to quality should significantly exceed that of cost.

Equally important is the institutional strengthening of Technical Evaluation Committees. These committees must include domain experts capable of assessing complex proposals beyond checklist compliance. Independent verification mechanisms and performance-based contracting can further enhance accountability.

A life-cycle approach to procurement is also essential. Instead of focusing solely on upfront costs, evaluation should incorporate maintenance, durability, and long-term performance. Contracts should incentivise outcomes—such as asset uptime and service quality—rather than merely the delivery of physical outputs.

Importantly, reforms must be calibrated. The L1 system can continue for routine and standardised procurements where quality differentials are minimal. However, for infrastructure and consultancy services, a more sophisticated approach is indispensable.

India stands at a critical juncture in its development journey, with ambitious plans for infrastructure expansion and technological advancement. Achieving these goals requires not just higher but also smarter spending. Procurement policies must evolve to support quality, innovation, and long-term value.

The time has come to move beyond L1. In doing so, India can ensure that public investment delivers durable assets, fosters professional excellence, and strengthens its economic foundations—the time to do it is now.

Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.